The Swedish Riksbank today raised the benchmark interest rate .25% to 3.25%. The decision was awaited, but the main thing today was the Riksbank's new report.

Before, they have made an inflation forecast, and as their stated goal was to keep inflation around 2%. This report has been the basis for markets expectation of what the Riksbank will do with their benchmark interest rate. From today, the Riksbank actually forecasts what they will do, saying that they probably will raise the rate 0.25% within the next six months, and then be able to keep it there for a while. They also give an explicit forecast for the benchmark (quarterly average) until 2010.

I note that most market forecasters had forecasted a higher rate of increase than they currently do. We'll see what happens, but it is interesting with such openness, modeled I believe after their Norwegian colleagues.


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